Both C= and Amiga were big sellers in Europe.
65816 was compatible enough for Apple.
C128 sold a few millions, I think a nicer 65816 based system could have even sold more. MOS could have had developed a 32 bit CPU in house, freeing C= from shackels of Motorola and their pricing.
Amiga, as nice and as advanced as it was, lost Commodore 3 years of momentum and a lot of money untill A500 took off.
The PC model of backwards compatibility could have been applied on the C= 8(C64) -> 16(C65816) -> 32(6532) bit line. The C64 was the 2nd biggest platform in the 80s, it was foolish not to take advantage of that.
The view of an obvious C64 fan.
Frankly, rather than trying to morph the 8 bit C64 into a 16 then 32 bit machine, a investment in evolving than Amiga platform would have made more sense.
After all, the Amiga had an operating system.
To this day people with any sense focus on evolving that, rather than focusing on fixed hardware specs.